Sales season in Europe

The summer sales are on in Europe and buyers are desperately needed. Portugal is crying out for investors in its debt, now ‘junk’ in the markets’ eyes, while Greece is about to begin a fire-sale of assets.

No chequebook is bigger than China’s. And while other investors have been steering clear of troubled eurozone states, China has been on a shopping spree.

So are the Chinese now eyeing up the Acropolis? Could an influx of Chinese investment yet avert meltdown in Europe? And when the financial dust has settled, will the EU discover that it has sold off its chances of a serious political partnership with Beijing?

Europe’s crisis is becoming China’s opportunity, and while this might be good news for indebted countries, it heralds the beginning of a fundamentally different financial – and potentially political – relationship between China and Europe.

While Europeans see their relationship with China as one of equals, Beijing is establishing with Europe the type of relationship it has rolled out in Africa – combining infrastructure projects, soft loans and a massive increase in investment.

On investment, the figures are clear. Five years ago, China’s total direct investment in Europe was $1.3 billion (€0.9bn). Now that sum is dwarfed by individual deals, such as its purchase of the Hungarian chemicals producer Borsodchem for $1.7bn (€1.2bn). As in Africa, infrastructure forms the backbone of the strategy. After Cosco, a Chinese company, took over Greece’s main harbour, its chief executive officer, Wei Jiafu, explained the deal’s potential with a Chinese saying: “Construct the eagle’s nest and the eagle himself will come.”

The change has come at breakneck speed. Europe is still phasing out its development assistance to China at a time when the China Development Bank is investing across the Balkans and the Mediterranean.

As in Africa, China attaches none of the traditional ‘donor’ strings, but the deals come at a price – explicit in features such as ‘buy Chinese’ clauses and implicit in the onus they place for silence on issues such as human rights. Not long ago, the former Soviet satellite states were wary of China, a communist system that reminded them of their own not-too-distant past. Now, Viktor Orbán, the avowedly anti-communist Hungarian prime minister, praises China’s social progress and talks of an “alliance”.

There are, of course, differences from Africa. China is not seeking natural resources in Europe. But Europe fits well into China’s next phase of development: it offers an opportunity to invest in green and high technology, and to buy brand names (Volvo and MG, for example, are now Chinese carmakers).

China’s state-owned banks and companies, meanwhile, are scouting for places to deposit excess capital. If the eurozone crisis becomes a banking crisis, Chinese takeovers of European banks would not be unthinkable.

China cannot be blamed for taking this opportunity. The Chinese dilemma, as pointed out in Shakespearean terms by Fu Ying, its deputy foreign minister, is “to buy or not to buy”. There will, he correctly added, “always be someone pointing fingers at us”.

Europeans should neither spurn, nor lament, China’s eagerness to spend its money here. Instead, they should get a better deal by working – united – through the EU.

Crucially, while Europe is open to investment, Beijing is increasingly protective of its nascent strategic sectors, and bars foreign companies from big infrastructure projects and from buying state-owned companies. Europe should make the case to China that free trade should be a two-way street.

Unity, however, entails a long-term vision, and many European states are, instead, seeking to muddle along by finding short-term solutions. That suits China just fine. It is easier to deal with individual states, particularly those in need.

China’s desire for retail therapy in Europe should be the EU’s prompt to formulate a coherent China policy, securing equal access and fair competition. If it fails to do so, Europe risks its supposedly strategic relationship with Beijing being relegated to a pure profit-making opportunity – for China.

Jonas Parello-Plesner is a member of the European Council on Foreign Relations and co-author of a recent report entitled ‘The scramble for Europe’.